Technical analysis: key levels for FTSE, DAX, Dow

Indices are in retreat yet again this morning, with European indices in particular looking weak. However, key supports still suggest that this pullback will be of the limited variety.

A chart
Source: Bloomberg

FTSE drops through 6800

The FTSE seems determined to snatch defeat from the jaws of victory, as it drops back through 6800.

The drop through the 50-day moving average leads us to suspect we will see a fall back to the 100-DMA around 6745, with a potential repeat of the June dive to 6700.

Short-term short positions may prove successful, but it would be unwise to get carried away, as a test towards 6730 would hit the rising trendline from the April lows. Only a loss of the 200-DMA would shift the position towards a bearish view, with an intermediate target of 6500.

DAX heading towards 50-DMA

The potential triple-top in the DAX has opened the way to fresh downside, with the index now heading towards the 50-DMA. A drop through here would suggest more losses, although 9800 worked well as support last week.

A declining relative strength index and a rolling over in moving average convergence divergence (MACD) and the stochastics indicate buying pressure has disappeared, but the rising trend from mid-March may yet see buyers return to the fray.

So long as the 50-DMA holds this is not a sellers’ market, but a drop through here would shift the view to a neutral one, with a summer drop to the 200-DMA always a possibility, engendered by low volumes.

Dow outlook still positive

Top callers were out in force for the Dow Jones after its 0.3% decline yesterday, but this index still looks more positive than others.

A drop through 17,000 would scare a few, but the 20-DMA provided excellent support in June, while the rising trend from the April lows would be the major line to look for, and a move towards here would mean we could see 16,850 without endangering the upward move.

Only a drop through 16,800 even remotely changes this view, but bears should remember that no dip has yet been too small to be bought – look to 11/12 June, when the Dow slumped over 200 points in two days before marching higher again.

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